Lead Researcher at Institute for the Geospheres' Dynamics, Russian Academy of Sciences
Contributor's Links: Economics as Classical Mechanics

I am a Doctor of Physics and Mathematics, Lead Researcher at the Institute for the Geospheres' Dynamics, Russian Academy of Sciences. Founding member of the Society for the Study of Economic Inequality.

Published three monographs in economics and finances:

Deterministic ... more

ALL CONTRIBUTIONS

On Decreasing Rate Of Economic Growth In The USA
There are numerous plots demonstrating the decelerating rate of real economic growth in developed countries. The long-term component of real GDP increase is very simple.
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Recession May Hit New Zealand In 2017; But At A Five-Year Horizon, Real Economic Growth Is About 2% Per Year
As predicted in 2009, in the next few years the growth rate will be increasing, except a deep fall in 2017, as we also expect in the USA.
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As We Predicted In 2010, A Longer Deflation Period Has Started In Australia
The Australian economy is in the beginning of a long deflation period with an elevated unemployment. The reason behind these processes is the same as in Japan – falling labor force.
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In The Long Run, The Rate Of Unemployment In Canada Will Be Growing. A Four Year Update
This is a four-year update for Canada. The model prediction is getting better and better!
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The Okun's Integral Law For Australia Revisited
The rate of unemployment depends on the cumulative change in real GDP per capita, as relationship implies. To reduce the rate of unemployment in Australia, the rate of GDP (real per capita) growth must be above 1.7% per year.
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In 2008, We Accurately Predicted The Evolution Of The Unemployment Rate In Italy
The unemployment rate in 2015 was 12.0%. For 2016, the rate was 11.6%.
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STOCKS I FOLLOW

AA Alcoa Inc.
AAPL Apple Inc.
ABT Abbott Laboratories
ACE ACE Limited
AFL AFLAC Incorporated
AIG American International Group Inc
AIV Apartment Investment & Management Company
ALL Allstate Corporation
AMD Advanced Micro Devices Inc.
AMGN Amgen Inc.
AN Autonation Inc
AON Aon Corporation
APA Apache Corporation
AUNZ Wisdomtree Trust
AVP Avon Products Inc.
AXP American Express Company
BA The Boeing Company
BAC Bank of America Corporation
BEN Franklin Resources Inc.
BHI Baker Hughes Inc.
BTU Peabody Energy Corporation
CAM Cameron International Corporation
CHK Chesapeake Energy Corporation
CMI Cummins Inc.
COP ConocoPhillips
CPI IQ Real Return ETF
CSC Computer Sciences Corporation
CVX Chevron Corporation
DBB PowerShares DB Base Metals Fund
DBC PowerShares DB Commodity Index Tracking Fund
DV DeVry Inc.
DVN Devon Energy Corporation
EIRL iShares MSCI Ireland Capped
EOG EOG Resources Inc.
EQR Equity Residential
ESV Ensco plc
EWC iShares MSCI Canada Index Fund
EWG iShares MSCI Germany Index Fund
EWI iShares MSCI Italy Index Fund
EWJ iShares MSCI Japan Index Fund
EWL iShares MSCI Switzerland Index Fund
EWQ iShares MSCI France Index Fund
EWU iShares MSCI United Kingdom Index Fund
FDX FedEx Corporation
GDP Goodrich Petroleum Corporation
GE General Electric Company
GEOI GeoResources, Inc.
GPC Genuine Parts Company
GRU ELEMENTS MLCX Grains ETN
GS Goldman Sachs Group Inc.
HAL Halliburton Company
HPQ HP Inc.
HRS Harris Corporation
ICCC ImmuCell Corporation
IVZ Invesco Ltd.
JDSU JDS Uniphase Corporation
JNJ Johnson & Johnson
JPM JPMorgan Chase & Co.
KMX CarMax Group
L Loews Corporation
LNC Lincoln National Corporation
MS Morgan Stanley
NBL Noble Energy Inc.
NFX Newfield Exploration Co.
NU Northeast Utilities Systems
PBI Pitney Bowes Inc.
PG Procter & Gamble Co.
PGLC Pershing Gold Corporation
PRU Prudential Financial Inc.
SKREF SKEENA RESOURCES LTD
SPY SPDR S&P 500
SWY Safeway Inc.
TE TECO Energy Inc.
TUR iShares MSCI Turkey Investable Market Index Fund
TXN Texas Instruments Inc.
TXT Textron Inc
WAL Western Alliance Bancorporation
WMT Wal-Mart Stores Inc.
XLNX Xilinx Inc.
XOM Exxon Mobil Corporation
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Work Experience

Lead Researcher
Institute of Geosphere Dynamics, Russian Academy of Sciences
January 2014 - Present (3 years 4 months)
Geophysics, Seismology
Fusion and Review Officer
CTBTO
2001 - 2012 (11 years 5 months)
Head of laborartory
Institute for Geosphere Dynamics, Russian Academy of Sciences
July 1990 - November 2001 (11 years 7 months)
Geophysics, Seismology
Research Fellow
Institute of Physics of the Earth, Academy of Sciences USSR
July 1983 - July 1990 (7 years 2 months)
Geophysics

Education

Institute of Geosphere Dynamics
Doctor of Sciences
1990 / 2015
Geophysics
Institute for Physics of the Earth
PhD
1983 / 1990
Geophysics
Moscow Institute of Physics and Technology
Higher Education
1977 / 1983
Physics, Mathematics, Space Physics, Geophysics

Publications

Modeling Unemployment And Employment In Advanced Economies: Okun’S Law With A Structural Break
Ivan Kitov, Oleg KITOV
ASERS Publishing
02/14/2012

Using a modified version of Okun’s law, we have modeled the rate of unemployment and the employment/population ratio in several largest developed countries: Australia, Canada, France, Japan, the UK, and the U.S. Our results show that the evolution of the (un)employment rate since the early 1970s can be predicted with a high accuracy by a linear dependence on the logarithm of real GDP per capita. All empirical relationships estimated in this study need a structural break somewhere between 1975 and 1995. We argue that these breaks are of artificial nature and were caused by similar changes in measurement procedures in all studied counties: the deviation between the GDP deflator and CPI and the structural breaks in the modified Okun’s law are synchronous. Statistically, the link between measured and predicted rate of (un)employment is characterized by R2 from 0.84 (Australia) to 0.95 (Japan). The model residuals are likely to be associated with measurement errors.

mechanomics: Economics as Classical Mechanics
Ivan Kitov
LAP LAMBERT Academic Publishing
10/22/2010

Macroeconomics is represented as a hard science like physics and, specifically, classical mechanics. Due to this similarity we have called our concept ?mec?anomics? highlighting its mechanistic entity. There exist statistically reliable deterministic links between measured macroeconomic variables. In the order of causality, the overall population and its age structure drives the evolution of real GDP which, in turn, determines the rate of participation in workforce. The level of labour force unambiguously defines the rate of price inflation and unemployment. The age structure also controls the S&P 500 returns. Statistically, the goodness-of-fit between measured and predicted macroeconomic time series is at the level of 0.9, with the residuals likely related to measurement errors. Tests for cointegration confirm the presence of long-term equilibrium relations. We have extended the sets of econometric tools by the method of boundary elements well-known in physics. 

Mechanics of personal income distribution: The probability to get rich
Ivan Kitov
LAP Lambert Academic Publishing
03/25/2010

The processes behind distribution of personal incomes and related measures of inequality have always been in the center of political and economic discussions. We have developed a microeconomic model which accurately describes the shape of personal income distribution (PID), as estimated in the Current Population Surveys. The model predicts the age-dependent PIDs as a function of real economic growth and demography. The underlying physical concept was borrowed from geo-mechanics. Our approach serves as a firm basis for definitions of income inequality. Officials, both government and financial, might be interested in the projections of poverty levels and mean incomes. For economists, the model provides a new tool of quantitative research. For the broader scientific community, the model links economics to hard sciences. All readers may estimate the probability to get rich depending on age and current income.

Deterministic mechanics of pricing: Price prediction of stocks, commodities and goods and services
Ivan Kitov
LAP LAMBERT Academic Publishing
02/08/2010

The book presents a deterministic description of future prices of stocks, goods and services and commodities. Statistically, observed and predicted prices are cointegrated. The overall price inflation is a linear and lagged function of the growth rate of labor force, with projections foreseeing a deflationary period since 2012. There are long-term sustainable trends in the differences between various CPI and PPI subcategories. A deterministic link has been found between stock prices and CPI. To validate the link, empirical models for fifty four S&P 500 companies are presented, with statistically robust price predictions months ahead. One can compile a dynamic portfolio with a deterministic profit. In July 2008, the model would have accurately forecasted negative share prices of Lehman Brothers and AIG. The predictions are likely reliable until their influence on the stock market is negligible

Inflation And Unemployment In Switzerland: From 1970 To 2050
Ivan Kitov, Oleg Kitov

An empirical model is presented linking inflation and unemployment rate to the change in the level of labour force in Switzerland. The involved variables are found to be cointegrated and we estimate lagged linear deterministic relationships using the method of cumulative curves, a simplified version of the 1D Boundary Elements Method. The model yields very accurate predictions of the inflation rate on a three year horizon. The results are coherent with the models estimated previously for the US, Japan, France and other developed countries and provide additional validation of our quantitative framework based solely on labour force. Finally, given the importance of inflation forecasts for the Swiss monetary policy, we present a prediction extended into 2050 based on official projections of the labour force level

Long-Term Linear Trends In Consumer Price Indices
Ivan Kitov, Oleg Kitov

Headline CPI, core CPI and indices for various expenditure categories were analyzed. Long-term linear trends have been found in the difference between the core CPI and the headline CPI in the USA. Duration of these periods is different for positive (18 years) and negative (8 years) trends, and the trends change to opposite during some shorter time intervals of 2 to 4 years. The difference between the core CPI and the index for energy is similar to that between the core CPI and headline CPI. The index for energy will reach the core CPI in 2008, however. Then, one should not expect further increase in energy price beyond that dictated by the CPI. It is likely that oil price will be falling in absolute terms. The difference between the core CPI and the index for food also has two linear branches after 1980, but the slope of the current trend is weak and the difference will intercept zero line only in 2014.

The Driving Force of Labor Force Participation in Developed Countries
Ivan Kitov

The evolution of labor force participation rate is modeled using a lagged linear function of real economic growth, as expressed by GDP per capita. For the U.S., our model predicts at a two-year horizon with RMSFE of 0.28% for the period between 1965 and 2007. Larger part of the deviation between predicted and measured LFP is explained by artificial dislocations in measured time series induced by major revisions to the CPS methodology in 1979 and 1989. Similar models have been developed for Japan, the UK, France, Italy, Canada, and Sweden.

Comprehensive Macro - Model For The Us Economy
Ivan Kitov

We present a comprehensive macroeconomic model for the US There exist strict long�term relations between real GDP, price inflation, labor force participation, productivity, and unemployment. The evolution of real GDP depends only on exogenous demographic forces. Other macro�variables follow up the real GDP. The links between the variables have been valid during the last several decades. All relations were (successfully) tested for cointegration. Statistical estimates are also presented. The relationships allow a reliable prediction of the macroeconomic state at very large (more than 9 years) time horizons.

Sustainable Trends In Producer Price Indices
Ivan Kitov

Previously, linear trends were revealed in the differences between the headline CPI and the price indices for various subcategories of the CPI in the United States. These trends can be continuous, as observed with the price index for medical care, or piecewise with turning points between trends with opposite signs. Similar features are found for the PPI and its components. The presence of sustainable trends in the differences allows prediction of prices for various commodities at time horizons of several years. In addition, it is possible to time the start of transition to the next trend. Accordingly, the trends reduce the uncertainty in forecasting prices for major commodities and also for their small components. The usage of trends in the PPI could bring substantial benefits to producers (planning) and stock market participants (timely investment).

Modelling The Evolution Of Real Gdp Per Capita During The Transition From A Socialist To Capitalist Economic System
Ivan Kitov

The transition of former socialist countries to capitalist economic system is modelled. The transition is entirely defined by three empirical parameters and the model describes only the evolution of real GDP per capita since the start of the disintegration of socialism. It is found that the transition has practically finished in many Central and Eastern European countries and their economic evolution is driven by forces associated with capitalist system. In the long run, the future evolution of the former socialist countries has to follow the same path as observed in other developed countries in the past. Even in the case of perfect economic performance, the studied countries will never catch up the most advanced countries. In Russia and some countries of the Former Soviet Union, the transition process has not been completed.

Modelling Share Prices of Banks and Bankrupts
Ivan Kitov

Share prices of financial companies from the S&P 500 list have been modeled by a linear function of consumer price indices in the USA. The Johansen and Engle-Granger tests for cointegration both demonstrated the presence of an equilibrium long-term relation between observed and predicted time series. Econometrically, the pricing concept is valid. For several companies, share prices are defined only by CPI readings in the past. Therefore, our empirical pricing model is a deterministic one. For a few companies, including Lehman Brothers, AIG, Freddie Mac and Fannie Mae, negative share prices could be foreseen in May-September 2008. One might interpret the negative share prices as a sign of approaching bankruptcies.

Predicting Conocophillips And Exxon Mobil Stock Price
Ivan Kitov

Exxon Mobil and ConocoPhillips stock price has been predicted using the difference between core and headline CPI in the United States. Linear trends in the CPI difference allow accurate prediction of the prices at a five to ten-year horizon.

The Evolution Of Firm Size Distribution
Ivan Kitov

Significant differences in the evolution of firm size distribution for various industries in the United States have been revealed and documented. For theoretical considerations, this finding puts major constraints on the modelling of firm growth. For practical purposes, the observed differences create a solid basis for selective investment strategies.

A Win-Win Monetary Policy In Canada
Ivan Kitov

The Lucas critique has exposed the problem of the trade-off between changes in monetary policy and structural breaks in economic time series. The search for and characterization of such breaks has been a major econometric task ever since. We have developed an integral technique similar to CUSUM using an empirical model quantitatively linking the rate of inflation and unemployment to the change in the level of labour force in Canada. Inherently, our model belongs to the class of Phillips curve models, and the link between the involved variables is a linear one with all coefficients of individual and generalized models obtained by empirical calibration. To achieve the best LSQ fit between measured and predicted time series cumulative curves are used as a simplified version of the 1-D boundary elements (integral) method. 

Mechanical model of personal income distribution
Ivan Kitov

A microeconomic model is developed, which accurately predicts the shape of personal income distribution (PID) in the United States and the evolution of the shape over time. The underlying concept is borrowed from geo-mechanics and thus can be considered as mechanics of income distribution. The model allows the resolution of empirical and definitional problems associated with personal income measurements. It also serves as a firm fundament for definitions of income inequality as secondary derivatives from personal income distribution. It is found that in relative terms the PID in the US has not been changing since 1947. Effectively, the Gini coefficient has been almost constant during the last 60 years, as reported by the Census Bureau.

The driving force of labor productivity
Ivan Kitov

Labor productivity in developed countries is analyzed and modeled. Modeling is based on our previous finding that the rate of labor force participation is a unique function of GDP per capita. Therefore, labor productivity is fully determined by the rate of economic growth, and thus, is a secondary economic variable. Initially, we assess a model for the U.S. and then test it using data for Japan, France, the UK, Italy, and Canada. Results obtained for these countries validate those for the U.S. The evolution of labor force productivity is predictable at least at an 11-year horizon.

A two-year revision: cross comparison and modeling of Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America, and Franklin Resources
Ivan Kitov

Approximately two years ago we presented results of price modeling and extensive statistical analysis for share prices of five banks: Bank of America (BAC), Franklin Resources (BEN), Goldman Sachs (GS), JPMorgan Chase (JPM), and Morgan Stanley (MS). Using monthly closing prices (adjusted for splits and dividends) as a proxy to stock prices, we estimated the best fit (LSQ) quantitative price models based on the decomposition into two defining consumer price indices selected from a large set of various consumer price indices (CPIs). It was found that there are two pairs of similar price models BAC/MS and GS/JPM, with a standalone model for BEN. Using five estimated models we formulated a procedure for selection the company with the highest return depending on the future evolution of defining CPIs. Here, we revisit the original models with new data for the period between October 2012 and February 2014.